Hewitt: K Plan Transfers Inert in June

In fact, transfer activity among 401(k) participants was
the lightest in the history of the
Hewitt Associates 401(k) Index.
Historically,
just under 0.07% of 401(k) balances have transferred
per day on a net basis; in June, participants transferred
just 0.03% of their balances.

June’s light performance followed May’slighter than average daily net transfers, totaling
just under 0.057% of the roughly $70 billion in 401(k)
balances tracked by Hewitt(See
Hewitt: K Plan Participants Flood Into
Fixed-Income in May
).
Hewitt attributed the lower than normal activity to
“subdued market activity,” since 401(k) participants are
most prone to transfer money in reaction to significant
market increases or decreases.

However, when participants did make a move, they did
so in the same irrational manner as has been the case since
April,when investors poured money into equity investments
in 71% of the days even though the S&P 500 was only
positive for 11 days in the month (See
401(k) Participants Rush Back To
Equities
).
In June, the S&P 500 ended the day positive on
13 occasions, versus eight negative closes.
Yet, investors favored fixed-income investments –
traditionally the bastion of down market days – on 12 of
those days, versus only nine days of equity-favored
transfers.

In fact, the benchmarks were uniformly up in
June.
Leading the way was the Russell 2000 (4.21%),
followed by NASDAQ (3.07%), Dow Jones (2.60%), MSCI EAFE
(2.19%), S&P 500 (1.95%) and Lehman Aggregate (0.57%).

Examining monthly transfer/cash flow data for the
month on the whole, Hewitt found most inflows be directed
into Large US Equity selections (30.06%), followed by
GIC/Stable Value (16.29%), International (14.33%), Mid US
Equity (12.79%) and Lifestyle/Pre-Mix funds
(11.67%).
Leading the outflows was Company stock (-67.96%),
followed by Bond (-24.57%), Emerging Markets (-6.74%) and
Balanced funds (-0.73%).

At the end of June, equity investments represented
just over 66% of total plan balances within the Index,
the level around which participants’ 401(k) equity
allocation has remained for much of 2004, Hewitt
found.